Movers, do you Need to Purchase Bonds?
In my 18 years of writing bonds, I have found that many moving and storage customers do not realize they need a bond until the last minute, which can put them in a difficult situation. Recently, I had such a situation with a customer who needed a military bond immediately, and the window that DPS opens for new bonds is very small – fortunately, I was able to get the bond written and issued in the same day with our bond carrier.
It’s also a common misconception that a bond is an insurance policy, which it is not. It’s a financial guarantee that your company will adhere to local, state, or federal regulations, and the terms of contracts. If your company fails to meet these obligations, the bond provides financial compensation to harmed parties, up to the bond’s value.
In this blog, I’ll detail what types of bonds are recommended for moving and storage operations and why, as well as the numerous benefits of being a bonded mover.
Bonds for Movers Explained
- Surety Bonds:
- Many states in the U.S. require moving companies to secure a surety bond before they can legally operate. Without the proper bonding, a moving company risks heavy fines, the suspension of operations, or even legal action.
- Some states, such as California or Texas, also require intrastate moving companies to hold bonds to protect consumers from fraud or malpractice.
- Surety bonds promise that if you do your work improperly and cause a customer a loss, then you will compensate the customer. If one of your staff steals a customer’s possessions during a move, the customer can file against the surety bond to receive compensation for the loss.
- License Bonds: Many states require a licensing bond to obtain an operating license. This bond ensures that you will follow all local regulations that apply to your operations, and guarantee that you will compensate your customers who sustain harm if you fail to do so.
- Payment Bonds: If you use sub-contractors or outsourced materials to help them complete certain tasks, a payment bond guarantees that the moving company will pay these parties appropriately so that no mistakes on their part reflect poorly on the customers.
- Performance Bonds: A contract makes promises to your customers on how you will do your work. If you breach the contract, your customer might be able to file against a performance bond. Moving military personnel? You’ll need a Department of Defense (DoD) performance bond.
- Bid Bonds: A bid bond is a guarantee that a mover will fulfill a contract if they are awarded a project. When bidding for a contract, you can use a bid bond as proof that you have adequately represented your assets and will perform your duties appropriately if you win the contract. Bid bonds can also act as promises that you will buy other bonds once awarded the job.
- Fidelity Bond: If you manage a 401K plan or other employee benefit plans, ERISA requires you to carry a Fidelity Bond.
- Motor vehicle Defective/Lost Title Bond: In the event you’ve lost your truck tile.
Bonds Come with Benefits
- Building Trust –Being bonded shows that your company operates ethically and follows the law, which can build your reputation and attract more business.
- Fraud & Misconduct Protection –Unfortunately, the moving industry is often plagued by fraudulent operators who engage in illegal practices like holding customers’ belongings for ransom or charging hidden fees. Surety bonds safeguard against misconduct, which protects the public.
- Competitive Edge –A bonded company can stand out as being more trustworthy and professional and ensures you’re eligible to take on more significant, lucrative projects. Also, some commercial clients and larger contracts may require proof of bonding.
- Financial Security and Risk Management –Bonds not only protect your customers; they also protect your business. Instead of facing costly legal battles or eroding customer trust, the bond helps resolve issues more efficiently. Of course, your company will still need to reimburse the surety for any valid claims paid out on your behalf. This acts as an incentive for you to operate responsibly and adhere to contractual obligations.
Bond FAQs
- What do I need to submit for bid bonds? The bond app, financials, personal financials, copy of the bond requirements for the company you are making bid for, copy of the bond form that the carrier needs to complete in order to issue the bid bond.
- Will my bond be cancelled if I have a claim? Each situation is unique and depends on nature of the claim and if there is a frequency claim issue.
- I need a bond fast! How long will it take? Bonds are typically issued within 24 to 48 hours. Performance and Bid bonds do take longer, as the requirements are ever changing for types of jobs movers are bidding on.
MOVER’S CHOICE has been providing bonds for moving and storage operations for 30 years to help our customers protect their customers, their business, and the moving industry as a whole. To ensure your moving company has an adequate risk management plan in place, and is fully compliant with legal and regulatory requirements, you’ll need both bonds and liability insurance.
Written By: Michelle Whitecotton
Michelle has been an insurance professional for 20 years with the MOVER’S CHOICE program. She loves the entire underwriting process and building strong relationships with movers and brokers. Michelle holds a degree in Criminal Justice from the University of Sacramento.
Michelle enjoys baking and the antics of her 11-year old chocolate lab, who likes to escape and visit the local brew pub!